Okun’s Law revisited on example of China and selected neighbors’ countries

This paper examines the unemployment-output relationship in China and neighbors’ countries (Vietnam, Indonesia and Philippines) from 1991 to 2023 to verify Okun’s Law validity by using a coefficient for various periods and impulse response analysis of VAR models. The estimates show that the correlation result is either positive or negative and varies considerably between the countries studied and period selected. Impulse response analysis provides also non conclusive results. Based on analyzed data and conclusions from selected literatures (e.g. asymmetric reaction of unemployment from production output shocks, specific employment patterns) the Okun’ law could be treated more as benchmark rather than objective rule.